RWE is selling its Czech gas pipeline network in a €1.6bn deal that highlights the appetite of insurers and pension funds to invest in stable infrastructure assets.
The German energy utility said on Thursday it had struck the deal with a consortium made up of Allianz, the German insurer, and Borealis Infrastructure, an investment arm of a Canadian pension fund. They will each gain 50 per cent of Net4Gas, which operates 3,600km of pipelines in the Czech Republic.
Allianz has been one of the insurers leading a drive into alternative asset investment to try to generate better returns at a time when yields from other securities such as bonds are being kept artificially low by central bank action.
Without enough returns from their investments, insurers, such as pension funds, cannot meet their obligations to savers or fund members.
Infrastructure assets are seen by insurers and pension funds as a good bet because they have reliable income streams over multiyear periods that allow the buyers to predict returns.
For utility groups such as RWE, some networks have become a millstone at a time when the companies are short of capital required to invest in new energy sources. In some cases, regulators have also pressed for unbundling of companies distribution networks.
Peter Terium, RWE chief executive, said the Net4Gas sale was “a further milestone in our divestment programme to reinforce our capital base and our financial strength”.
RWE said the enterprise value for the acquired company was a “normalised valuation multiple” of nine times its earnings before interest, tax, depreciation and amortisation.
Rainer Husmann, chief executive of Allianz Capital Partners, said: “It fits well with Allianz’s infrastructure portfolio and investment strategy as a long-term investor . . . this is an important step for us in expanding our portfolio of high-quality infrastructure assets.“
Michael Rolland, president and chief executive of Borealis Infrastructure, said the investment expanded a European portfolio that also included investment in transport assets such as Associated British Ports and HS1, the UK’s first high-speed rail line.